Pender's Blog

Microsoft, Yahoo Combine To Stay Well Behind Google in Search

Don Quixote lives. Specifically, he lives in Redmond, Wash. and is more commonly known as Steve Ballmer. The Microsoft CEO has been jousting at the windmills of consumer search for years now, and this week he finally got the prize he has sought for some time: a somewhat less-distant second place to Google in the search market.

Yes, finally, Ballmer and Microsoft have signed a 10-year search deal with Yahoo, which basically makes Yahoo a sales arm of Microsoft and its new Bing search engine. Pending regulatory approval, Microsoft and Yahoo will partner to have less than 40 percent (or, some say, less than 30 percent) of the current search market share.

Being a strong No. 2 in search is fine and all -- and it might bring a much-needed revenue boost to Redmond -- but the problem here is that this deal basically represents two search losers going through the long, painful and expensive process of integrating operations only to, in all likelihood, come nowhere chose to catching the dominant and ever-innovating market leader.

Indeed, observers thus far seem to think that Google will mostly yawn at the Microsoft-Yahoo agreement, which has been a non-kept secret for years now. And while we're big fans of competition driving innovation in any market, we at RCPU don't really see how two companies that couldn't do separately what Google does as well as Google does it are going to combine to take on the search giant in terms of either innovation or market share.

And, as always, we're concerned that Ballmer's battle with the search windmills will further draw Microsoft's attention away from its bread-and-butter products, offerings such as Windows, Office and servers that do a lot more to enrich partners than a second-rate search deal will ever do. Granted, Windows 7 looks like a winner, but Vista should serve as an object lesson that Microsoft taking its eye off the ball in a critical product segment can have dire consequences.

Nevertheless, Don Quixote Ballmer is absolutely determined to keep up his futile battle with an opponent he can't beat, so partners will just have to live with a Microsoft that has an almost unhealthy fixation on Google and consumer search.

The old Avis rental car commercials used to have the tag line, "We're No. 2, but we try harder" or something to that effect. Microsoft and Yahoo will have to try very hard indeed to be anything but No. 2 in a two-horse race in search. Our money is still on Google.

What's your take on the Microsoft-Yahoo search deal? Send it to lpender@rcpmag.com.